[photopress:china_walmart_1.jpg,full,alignright]A REIT (you could argue it should stay all in capital letters but newspaper practice seems to be to run it as Reit) is a real estate investment trust where the shareholders are, effectively, buying shares in a real estate portfolio. In Singapore CapitaRetail China Trust is a Reit with its real estate assets in China.
This Reit was offered to the public (and, but of course, associates of those directly concerned) on the Singapore stock exchange. And it went soaring into the stratosphere.
Several things going for it. First institutional investors jumped at this first opportunity to buy Chinese retail assets through a Reit sponsored by well-respected Singapore developer CapitaLand.
It is suggested the deal was more than 100 times covered when the institutional order books closed with virtually ‘everybody’ who tends to invest in real estate having submitting orders — including Reit specialists out of Europe and the US. But the offering also drew a wide variety of other investors such as consumer-focused funds, China funds and hedge funds.
One comment was: ‘This deal hits the epicenter of the sweet spot as it offers exposure to both real estate and the retail sector. It is also a great play on consumption and the rapid growth of the Chinese middle class.’ You may care to remember the phrase ‘epicenter of the sweet spot’ for future use.
This Reit has extra pulling power for it has the right of first refusal to acquire properties held by two private retail funds that are also sponsored by CapitaLand as well as from CapitaLand’s wholly-owned property arm, CapitaLand Retail.
It also has the right to invest in 14 retail mall developments in China that will be anchored by Wal-Mart hypermarkets, covering approximately 600,000sqm, as well as up to 70 percent of future Wal-Mart projects in China that will be developed by SZITIC until the end of 2010.
Add them together and you come up with operations spreading to 24 cities in China. No wonder it took off like a rocket.